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Romania may be one of the EU’s poorer countries — income per capita was just over half the Union average in 2014 — but that is not how it appears from Bogdan Cocian’s office. Outside his window, the lines of modern, if generally modest, cars parked in rows attest to the relative wealth of his employees.

Mr Cocian is general manager of Elba, a specialised manufacturer of lighting equipment with a 95-year history in the city of Timisoara, western Romania. He expects his spacious, spanking-new manufacturing site to produce sales of €45m this year, the greater part from headlight and rear lamp assemblies for the domestic and global auto sector. This is 7 per cent up on 2014, and would have been better but for the “geopolitical situation in Russia”, he says tactfully.

Elba is part of Romania’s fast-expanding auto components sector, which, given the country’s appallingly managed economy in the communist era, is arguably even more pivotal for its development than for peer sectors in the Visegrad Four nations to the west.

According to a report by the Association of Auto Manufacturers of Romania (Acarom), production of auto components expanded from €7.6bn in 2011 to €12.6bn in 2014, a 66 per cent increase, with the sector providing about 111,000 jobs. The catalyst for this development was the takeover of Dacia, Romania’s previously state-owned flagship manufacturer, by Renault-Nissan, the Franco-Japanese carmaker, in 1999, and the subsequent management decision to source as locally as possible.

“Dacia now employs around 14,000 people, represents the main growth engine of the industry and is Romania’s largest exporter,” says Radu Craciun, chief economist at Banca Comerciala Romana (BCR), the country’s largest bank. “It’s reported to have around 1,000 suppliers in Romania, with an annual spending of around €2bn on automotive parts.”

Elba’s Mr Cocian credits the Renault-Nissan alliance not only for making Dacia an important demand source for locally produced components, but also for establishing an international distribution centre that sources and exports parts to its global car plant network.

“This is one of the real essential drivers of development for the Romanian auto parts industry,” he says.

The renaissance at Dacia has helped attract foreign suppliers, including Johnson Controls of the US, which has eight plants in the country employing some 4,200, and Leoni, a German-owned cable and wiring producer, which operates three plants providing about 16,000 jobs.

While Dacia forms the bedrock of demand for the country’s auto suppliers, other foreign manufacturers — such as Ford, which began building vehicles at its Craiova plant in 2008 — have been attracted by low labour costs. Averaging €7,700 per employee a year, barely half the €15,000 level in Hungary and Slovakia, BCR’s Mr Craciun says, this has secured some high-profile, export-oriented manufacturing investments.

These include Germany’s Continental, which has invested some €1bn in seven production sites and three research and development centres across the country since 2000. It is set to employ about 16,000 more Romanians by the end of this year.

Another German-owned company, Star Transmission, a subsidiary of Daimler, last year announced the creation of a third production site at Sebes in central Romania, a €300m investment, for the production of its nine-speed 9G-Tronic automatic transmission.

Such investments destroy any notion that Romania is suitable only for low added-value, screwdriver assembly plants, and illustrate just how far and fast the Romanian auto sector has evolved in the 25 years since the overthrow of communism, says Mr Craciun.

“It’s very nice to hear that such high-tech products are made here,” he says.

Yet, despite the headline-grabbing, high-tech investments, as the Acarom report notes, productivity in the Romanian auto parts industry compares badly with its peers in central Europe. At just €12,100 per employee per annum in 2013, the value of output per worker was barely half that of neighbouring Hungary and lags even further behind the Czech Republic, the regional leader, which claims €28,100.

“It’s a major challenge,” says Bogdan Belciu, a partner at PwC, a professional services company, in Bucharest. “Moving into more complex, higher-value manufacturing, with more research and development activity, will require a complex effort [involving] local auto producers, local and national authorities and universities.”

The importance of Romania’s automotive industry is clear. In 2014, 50 companies in the sector accounted for 40 per cent of Romania’s €52bn in exports, says Mr Craciun.

But the government needs to address issues such as excessive bureaucracy and poor infrastructure, he says, and must not assume further growth and economic developments will be automatic.